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tonight, will fed vice chaichair donald kohn replace bernanke. and how about john taylor and his taylor rule. he pushed back against bernanke's easy money in today's "wall street journal." thing taylor rule and king dollar. and banks brace for bonus fury as well they should. why should they get any bonus money at all while they were t.a.r.p.ed? >> drill, drill, drill. oil hits a 15-month high. stocks gained today and will continue. the kudlow hotline will be opened for your calls. fasten your seatbelt. "the kudlow report" begins right now.
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good evening. i'm larry kudlow. welcome back to the kudlow report where we believe that free market capitalism is the best math to prosperity. will fed vice chairman donald kohn replace ben bernanke? it is possible. bernanke has four senate holds on his nomination and there may not be a vote by january 31st when his term as chairman expires. who would become chairman? take a listen top senators judd greg and chris dodd from "squawk box" this morning. >> i think a point in which listeners might be interested in, chris, is what happens to bernanke's position if he's not confirmed by the end of january. >> by the end of january if we don't confirm he could not serve as chairman. he could serve as a member of the board but then the vice chair man would have to become the chairman. >> two distinguished senators. bernanke has troubles because as i said, four is notes have a
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hold on his nomination. that means a floor debate about bernanke that will require a 60-vote role call before they vote up and down on the actual nomination. in other words, they got to vote on closing down the debate. so it could delay a full vote well past january 31st when mr. bernanke's term expires. many believe that donald kohn who is a brilliant economists is nonetheless, even more dovish then helicopter, ben. and meanwhile, adding to all this, in today's "wall street journal," stanford's john taylor, who appeared on the show last week, pushed back against bernanke's taylor-rule criticism from two sundays ago. when the fed-head tried to absolve the central bank from any easy-money bubble culpability earlier in the decade. the taylor rule shows clearly the fed's target interest rate was way too low in 2002 through 2005. in fact, too low for too long.
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and real interest rates during that period were negative. now far as wall street trading risks and borrowing leverage is concerned, that was all part of the me the meltdown. this is like throwing bloody meat to a pack of sharks in the deep seas of the ocean. to get a reaction on the possibility of bernanke's demise and john taylor's bernanke smackdown, let's turn to our two distinguished guest. peter nachlt avarro and mark from the cato institution. mark, let me begin with you. this bernanke story gets trickier and trickier as for as reconfirmation is concerned. i want your quick reaction to the chain of events. this was published in the "wall street journal" blog site that alerted people to it. our own steve leisman covered it. you saw them talking bt it
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earlier in the program. what's your take, mark? >> i think it's more sound and fury signify nothing. i'll tell you why. for starters, i think bernanke is going to get confirmed at some point. there might be a window of time in which donald kohn serves as acting chairman but you'll still have the same board. kohl will be there knowing that bernanke will be chair at some point so i think you'll see the same behavior and actions by the fred so i don't think it really changes anything in the long run. you might see several weeks or a month of interim time but it's the same board and like i say, despite my own feelings about whether bernanke should be confirmed or not -- >> which are -- >> the politics are much more interesting than that. here, we have a senate pocket veto essentially on bernanke's appointment and the senate candidates are looking at the poll numbers on bernanke and saying, how the heck can we put this guy back in office with
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unemployment at 10% and bernanke's favorable ratings are at the same level. bernanke, attacking taylor? that was beautiful. why did he do that? because he's looking over his shoulder at the guy who's likely to succeed him. >> and so many expertion, peter, have sided with john taylor. and whatever one thinks of the absolute perfection of the taylor rule, i like it, but i could amend it, whatever. taylor is smarter than i am. but peter, experts from "the new york times" through people on the center left like dean baker and, lots of hard-money conservatives like myself and you, have just really smacked down bernanke for trying to smack down taylor. and, by the way, the polls show the poll and others show that bernanke is a very unpopular fed chairman, peter. so i want to po sit this. the longer this thing, bernanke reconfirmation gets postponed the harder it's going to be for bernanke to get the job. is that possible? >> they're listening to your
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show. you're the guy taking the lead. if you look at the press out there, the anti-bernanke discussion is taking place center court here. let me say this about the taylor rule. it's very interesting to me. i think it's fair to say the taylor rule should have been applied back between 2002 and 2005. but if you look at it really closely, it is ambiguous in this current environment because what it says is you raise interest rates if there's inflation. but you cut them if there's a gap between potential output and real output and there is, right now. and we're looking at a decade projection of below-potential output performance. i got what -- i'm going to call it the navarro rule. i think they should raise short term rates to where it neutralize this is dollar carry trade. to me, that's the biggest threat right now that a global economy. bernanke's carry trade is getting the stock market bubble a kmodsity bubble and a real estate bubble globally. a rerun of what we had with the
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housing bubble. don't these people learn? >> those are important points. since bernanke's speech two sundays ago before the american economic association, gold has remounted a terrific rally and the dollar, which had been rallying has now turned over. the oil price, which obviously qualifies as a dollar exchange rate sensitive commodity, is back up to about $83. some people, including me, are starting to get worried about that. what do you make of this scenario? the longer the bernanke thing reconfirmation is held up, the harder come the criticisms and the less likely the guy will ever get through. he's in a real pickle. >> i think he's in a real pickle and there's really part of me that wants to hope that you're so right. if he doesn't get reconfirmed right away this will drag out and he's not going to get this because i've never been a fan of his reconfirmation but there's another part of the me that's like, the white house needs to be fully behind this. the democratic caucus will be behind it.
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i think there's 60 votes for him. >> if he gets 35 -- and this is a point i made several weeks ago. if there are like 35 votes against bernanke, i think he should withdraw his nomination. >> i agree. >> he will not be, mark and peter, he will not be a truly bipartisan fed chairman. you can't appoint a guy with this kind of important job, just on the strings of the democratic caucus. it's like driving health care through. the country is so divided. the kro is so opposed to bernanke, as the country is opposed to health care, according to the same polls, how does he do this? i don't get it. if he gets 35 nay votes he should withdraw. >> we're setting up for a republican tsunami in 2010. the gingrich revolution in '94 and i'll tell you what, bernanke's reappointment would be a gift to the republican party just, yet, another thing to run on because you and i both know that by the election time,
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there's still going to be trouble in river city here. i think it's really important, if we're talking about the welfare of the country and longrun prosperity, people have to get it through their head that the fed is not the only agency that can basically fix this economy. it doesn't have the policy tools. we need tax reform. we need regulatory reform. and you can't put it all on ben in terms of his performance. and he thinks you can. that's why he's put easy money down and killing the dollar and the economy. >> i think he is cupable. >> definitely cupable. >> greenspan was the chairman and people sabre ncaa was greenspan's co-pilot. and some people including myself, believe that the fed has overstayed it's si-money welcome. the emergency was over at the latest, the financial emergency was over by the middle of this year. but they continue to buy these mortgage bonds and they continue to expand their balance sheet as you have pointed out. and i think he's gone way too far. let's talk for a second and then
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i have another thing about a freedom of information act issue. but, mark, what about donald kohn. he's been around quite a while. he was an important fed bureaucrat and then on the board and now vice chair pan. he's a very smart man, very smart man. and some people say he's more dovish than bernanke and he will never snuggle up and restrain policy in our lifetime. what do you make of that? he may be the guy who's just in the right place at the right time and becomes the new fed chairman. that's not out of the question. >> he could very well be. it's worth remembers that donald kohn was allen greenspan's choice for his replacement. this is who allen greenspan wanted to continue his legacy. he's keeping that tradition and i agree. i think donald kohn is one of the smartest people out there in terms of the fed. he's very dovish. i ultimately don't think it will make a difference because you would get the same very, very loose monetary policy for a long time when o donald kohn as you would under ben bernanke. >> how do i get john taylor in
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there. >> get a new president. you won't get him under this president into you need a volcker-like move and the way to do it is to get voektory tell obama to put taylor in there because volcker has the ear. they are running that committee now in terms of the economic recovery and that's a win-win for everybody. but donald kohn and bernanke? it's not going to work. >> on the way out of this, let me ask you this. more new information breaking, a press release late in the day. the federal reserve now is asking a u.s. appeals court to block a freedom of information ruling that would force the fed to reveal the identities of all the financial firms that might have collapsed, that were on the list to get t.a.r.p. money. you know, the fed has had this wall of secrecy and it drives me crazy. it's the same thing with the gao awe dpit of the fed. they take the -- the audit of
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the fed. they won't be in the meeting, but the six months. this is the same thing. this one says, anybody who applied for t.a.r.p. money would have to be publicized. don't the taxpayers have a right to know? why does the fed always come down on the side of secrecy, mark? >> i 100% agree with you. the public has a right to know and i think that's one of the reasons the feds needs to be audited. i found this when i worked on the staff senate banking committee. we asked who was being bailed out and they wouldn't give the information to con. they were not willing to give it to the public. i can understand the concern that we don't want to publicize who might be failing so there's a reasonable time lag. i would say three or four months after the application, there's no reason that that should not be made public. we should be made public who got t.a.r.p. money and then did fail. all this information needs to get out there. like i say, you can do this in a way that you're not jeopardizing if health of any one institution at the time. but ultimately this information needs to gets out. it can't be years later. it has to be months later where
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the public can evaluate the situation. the only way to evaluate it is the treasury department's response to the crisis is to take their word for it. >> the u.s. court of appeals in manhattan will decide whether the fed must release records of the unprecedented $2 trillion u.s. emergency loan program, launched after the 2008 collapse of lehman brothers. this was this lawsuit, freedom of information lawsuit brought by our friends at bloomberg news. and the fed is fighting this, peter. once again, the fed seems to be on the wrong side of the public needs to know. that's my problem with this. >> larry, there's two competing philosophies here. we have bernanke now in power. basically, doing things in secrecy, away from the public. we've got, on the other side, the taylor rule, which basically is a way of saying, full transparency at the fed. you get a rational expectation framework and allow all actors
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in the marketplace to adjust. i say, i don't know what the judge is going to do because you don't know who appointed him. but we need transparency at the fed. i think the economy works better. we'll all get to work better. so that's what tissue is about to me. >> and predictable rules as you say? >> right. >> the taylor rule may not be perfect but at least it's predictable. >> you have predictable rules that everybody can see. and then react and respond to. >> instead of this pillar to post and -- >> yeah. it's a great philosophical debate that has real meaning for millions of people right here in america. i hope the senate is listening to your show, larry, and they get the message that this bernanke appointment needs to be re-evaluated. >> thank you very much. peter and mark, i appreciate it. coming up, banks are bracing for bonus fury from main street as well they should, in my view. why should they get any bonus money at all while they were t.a.r.p.ed? after t.a.r.p.ing that's different. during t.a.r.p.ing that's
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different. we have bill isaac and the former commerce secretary and "the new york times," we'll debate all this when we return. you're watching cnbc first in business worldswide. ( music playing ) if toyota gets credit
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>> you would think the financial institutions that are doing better would have some sense and this big bonus season, of course, it's going to offend the american people. it extending me. >> all right, it sfends her. that's christie roamer, the chair of the president's council of economic advisers and she's a very distinguished economists and a potential fed chair perhaps, herself. that brings me to my second money-politics message concerning the upcoming big
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banker bonus announcements in the weeks ahead. there may well be a public backlash since the banks were rescued by taxpayer, t.a.r.p. money. a recent poll shows that 61% believe that government should regulate the level of pay in bonuses for company executives who were on the public payout. meaning t.a.r.p. if the bailed-out banks pay the money back, another 64% say the government should stay out and not regulate compensation. which brings me to my thought. the banks really do need to fess up and thank the taxpayers. that's a public relation's move. but they've never really done that and the taxpayers dea "thank you." number two, let me walk through this scenario. in june of last year, jp morgan and goldman sachs, they paid
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down t.a.r.p. last june. so my humble thought is, they could get their bonuses, whatever they get, for the second half of the year, but not the t.a.r.p.ed up first half of the year. do you see what i'm saying? however other big banks like the bank of america, wells fargo and citi, didn't det.a.r.p. until the end of the year. so why should they get any bonuses at all based on this idea? and if they do get bonuses, though bonuses should really be miniscule. in other words, the ones that paid back t.a.r.p. in june, let them take a half-year bonus. the ones that didn't, really have to forego 2009 and look for 2010. i want to propose this thought to my panelists as we talk about the coming outcry over the big bank bonuses. we're joined now by former fdic chairman bill isaac. contributor and former commerce secretary and ace "new york times" reporter, author of the
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best-seller "too big to fail." andrew, i want to go to you. i know you cover this beat on a dailey basis and you know more about it than i do. this is my thought. if you were t.a.r.p.ed up andrew i say "no." when you get de-t.a.r.p.ed and i said that, that's when the bonus clock should begin. what do you think of the idea? >> not a bad proposal, larry. could y i think 2009 is a special year in terms of the amount of government support that was given to these institutions, even those institutions who 2k3w5i6 back the t.a.r.p. money six months into the year. the real question ask -- is this a one often, should the administration be doing something? the one issue i want to suggest to you is, if there's going to be a rollback attacks of some sort or some regulation on the compensation, it has to be done on a global basis. you can't have it because people will start talking and you really -- i don't think want to get into a situation where
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you're restricting comp on the government-owned entities and not on everybody else, because you effectively, you' you're penalizing the taxpayer and those will be the ones that have the hardest time. >> secretary, welcome back. carlos, let me ask you your thoughts. i think one of the great mistakes the banks have made has been to fail to be up front and to say, look, we got a lot of taxpayer help. and we appreciate it. and you helped get us through. now here's how we're going to react to this. and that's why i've come us with this idea. you get half your bonus if you pay down t.a.r.p. in june. you forego your bonus if you didn't pay it down until december. what's your thought? >> i think you're right they should thank the taxpayers and recognize that they've been helped tremendously. but, larry, the idea of -- if you get t.a.r.p. money you shouldn't get bonuses but if you don't have t.a.r.p. money you're okay to have bonuses, i think, is an emotional argument. it has nothing to do with the
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business model or how those businesses should be run. with compensations czar feinberg, citigroup reached an agreement to have a certain framework. more stock and less cash, longer vesting periods. that framework has been agreed to by other banks and we're going to see that. in fact, compensation levels, bonus levels will be below 2007 in terms of per seventh of revenues for me many banks. so why are we second-guessing the bonuses if the administration's compensation czar has essentially agreed to a framework? >> i understand that. before i get to big isaac, i think the obama administration has been too soft on this. that's where i come out. i dare say, you have some very leading bankers who were very strong supporters of mr. obama during his campaign. all right? that includes john mac of morgan
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stanley and jamie diamond of chase and others. i have to ask, as many in the public are asking, is that the reason that these big bank guys with their support and their contributions, have they made the obama administration too lenient on the question of t.a.r.p.ed bonuses? un-t.a.r.p.ed bonuses, no problem. that's between the shareholders and the board of directors and so forth. t.a.r.p. bonuses, i think obama is letting the banks offer the hook and i think there's a little bit 06 a populous backlash against that, carlos. >> i just think that you're going to put the banks that we received t.a.r.p. money in a bit of a disadvantage and we want them to succeed. we want these banks to succeed. we don't want to be the uk where they tax them 50% on bonus money. i'll tell you, ex-pats are getting out of the uk. ex-pats that were going to go to the you can uk are no longer going and they'll lose their global financial service's position. >> bill isaac, fortunately,
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secretary tim geithner is against the bonus tax and i'm not making a case for controlling executive compensation or bonuses in the future, bill. but i am offering some objections to the past. and that's 2009. besides the fact that the banks got a lot of t.a.r.p. money which helped them stay afloat and gave them capital positions with which to trade, let's face it, bill, the federal reserve, another instrument of the government, however independent, has given them zero interest rate all year. and as i said in the earlier segment, that's like throwing bloody meat to sharks in the opened waters, bill. so between t.a.r.p. and a zero interest rate we really helped out these banks quite a bit, did we not, bill isaac? >> i think we did. i would point out that there are a number of banks, that didn't want the t.a.r.p. money. didn't need it and didn't want it and they were ordered to take it. >> can i ask you on that point -- don't means to disrespectful. i want to clarify. one of those banks that makes
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that claim and andrew sorkin, weigh in, is goldman sachs. now we learn, now we learn that through the aig bailout, goldman sachs got a full 100% on their insurance swaps, their credit derivative swaps which many people believe did, in fact, save them. bill isaac, you first. gold man said they didn't need it but it turns out they may well have needed it, bill isaac? >> i wasn't referring to goldman. i was referring to a number of others in the list of commercial banks that objected to it and i know they did. it is a little training to punish them. let me make a point, larry. i think your idea is a sort of elegant way to go about this. and i would say that the bankers, whether they it or not, really are in a very dangerous political situation right now. and anything they could do to
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diffuse this issue would be very helpful. and i really think that the very senior executives in the banks ought to think about not having bonuses. or, at least, minimal bonuses for 2009. and i think that the rest of the people in the bank, who are eligible for bonuses ought to be persuaded that it is not in their best interest and not in their banks best interest -- >> you're coming up to the lloyd blooingfine situation. victor is not taking a bonus. i think he paid himself a dollar for 2009. if i have the second part right, john plaque of morgan stanley is not taking a bonus. andrew, this comes up to mr. blankfine. and once again, we have the aig involvement. i have nothing about goldman sachs's great trading machine. but it sure looks like taxpayers funded it last year. >> you know, i think -- first of all, bill was referring to jp morgan, i don't want to get that
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wrong. on the goldman sachs issue, there's a question of were they going to go over the cliff? i think there was a moment they possibly would have. did they need that t.a.r.p. money? unclear. did they need to become a bank-holding company? absolutely. if you think about those harrowing days in september, they were about to go off the cliff. there were things the taxpayers did and because of that decision, the bank holding company status, they were given all sorts of other benefits, so it's that benefit that i think we need to focus on. the aig benefit, of course, as well and i think bill is right. in terms of lloyd blankfine's compensation, the only and easiest way to diffuse this is to take a dollar. in fairness, i think he took a delay in 2008 as well. >> if he did, good for him. i don't know that. carlos, what do you think of that. foregoing the bonuses for 2009 and the rest of the executives in my little paradigm about this, the first half of the year you're out. second half you can get a bonus but only 50%. carlos, as you know, the public
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will want its pound of flesh. you have left-wing populous right wing pop laos that are furious at how this taxpayer money appears to be going into the pockets of bankers and the bankers have not done anything on a pr campaign to solve that problem, carlos. >> and i think they're walking a tight rope. and you're right. we should be very, very grateful that the government stepped in and bailed these banks out. and the tight rope is that we don't want, as you say, the public backlash. but we also don't want to put these banks at risk. we want these banks to succeed. if they succeed, we criticize them. if they don't succeed we criticize them. we want them to be successful. >> my thought on that is, to prevent further meddling -- i'm a anti-meddler. i'm a free-market guy. as we get past this t.a.r.p. period, we start the clock from scratch and we don't have executive compensation
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regulations. i don't want any of that. just so you understand where i'm coming from. in this transition period, a lot of taxpayers and voters want their pound of flesh. >> but, larry, here's a question. a lot of these firms have actually done a lot of the right things in terms of the new incentive systems and structures that they've created. they've done those things, yet, the pop laos backlash is there and because -- it's become a moral and philosophical issue about the number, the size. and that's an issue i don't think is going to dissipate any time soon. it's going to be part of the national conversation for a very long time. >> we should be looking at per sent of revenues. it's tough to explain a complex compensation system, a business model to the public at large. >> bill isaac, i'll you the last word. sheila bair of the fdic, i think tomorrow, is coming out with executive compensation limits. do you know much about that?
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>> no, i don't. i'm concerned. i don't see how the -- you come up with a system that makes any sense in terms of this. the government really has an interest -- i think the bank regulators have an interest in making sure the compensation plans don't create incentives to do the wrong things. but beyond that i don't think the government ought to meddle on setting amounts of it or the structure of it or anything else. >> we're going to leave it there. thank you, everyone. thanks very much. coming up, earning season begins and, i'm sorry, but alcoa flunked after the bell. stocks gained today. my question is -- will the rally continue? "the kudlow report" coming right back. verizon makes a big deal about their maps,
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the nasdaq lost a little bit 37 big story. gold up $13 now at $11.52. oil a 15-month high at one point during the trading day. and the dollar fell to a three-week low. now, earnings season did begin with alcoa. fortunately,al okay what flunked. it didn't beat it lost. and it close down, i think, 5 percentage points in moonlight trading. so the big question for our two guests, both here and in china and around the world, will the rally continue? we have mike holland and jim
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paulson of wells capital management. gentlemen, good to see you, jim, a lot of people were just sawly stating that alcoa would get us off to a big running start. it didn't. its revenues were up but earnings fell. is there any significance because commodities have been hot as a pistol? >> i think it says something about the cost and what energy costs might mean for other basic materials' providers, larry. that seemed to be what hit alcoa the hardest. but i think at the end of the day, i think the market will look increasingly closely at topline results here in this fourth quarter reporting season, larry. we know margins for the most companies have been very good and we got a lot of profit leverage. what we're going to be focused on, i think, the most is revenues. i think alcoa shows that maybe early signs that those number also continue to be pretty good. >> i don't know. >> but also -- >> my column -- let me take a different view.
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alcoa is alcoa. that is not necessarily a -- for the other 4 9 companies in the s&p or whatever, mike. but i agree with jim paulson that top-line revenues are rising and business sales are growing. that's what the economic statistics are showing. but, mike, if we get earnings's disappointments because of the rising price of energy, will that not slow down the rally? this is apart from the federal reserve and apart from rising treasury rates. just this one point. we saw this in a bigger way in 2008. bigger energy costs not good for profit. what do you make of it? >> the answer to your question, larry, is yes. if we do get the disappointment in the earnings as we're moving forward over the next few weeks, it will slow down the rally and the market will go down. but i think jim paulson has it exactly right. that is that it's now about revenues and not alcoa dropped 21,000 workers.
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the new ceo has done everything he could on the cost side. now it's about revenues. we see yesterday that 18% rise in exports in china. china is getting big revenue gains. they're starting to transport those to other parts of the world. some companies in the u.s. over the next couple of weeks are going to report surprises on the upside in revenues and earnings and that's going to help. >> jim paulson with, what are your top investment sector picks right now? >> well, i like -- my favorite is the industrials, larry. in part, that's because they haven't done as well as some of the other cyclicals like the consumer ones and technology and like even basic materials. i like all of those areas that are leveraged from a profitd sense to the economic cycle. and my industrials are manufacturing sectors probably the best. i like the fact that we've had a weak dollar this here that i think is the biggest beneficiary of it is the manufacturing and industrial sort of center in the united states. >> you just got through telling me that the energy cost increase is damaging the earnings of
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alcoa. the weak dollar is directly responsible for that energy cost, jim. now you can have it one way or the other but you cannot have it both ways, my friend. you touted that -- you're saying you're going to hang yourself on your industrial because the hike in oil prices and energy prices are going to hurt those industrial costs. and profits. but -- >> but what's also happened is industrial prices, topline pricing for industrial manufacturers is exploded to the upside. for alcoa, for example, the aluminum future's prices were up over 20% in the fourth quarter. 45% year-on-year. and that's what's contributing to all that almost 8% revenue gain that alcoa posted in their topline. >> i hear you. i'm saying you need earnings. earnings are the -- profits. topline sales, terrific. you're right. earnings are so important. i'm a bull on this question. i'm just kind of making you go through your paces because i saw an inconsistency. mike, talk to me about the china story for a minute.
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i believe you're still on the board of the china fund and our friend, jim, is a terribly bright guy and he says china is a total credit bubble that's going to burst. you mentioned in your opening thoughts that the china export story was good and the china growth story was good. and i need to know who's right. you or jim? >> jim will be right. it's a question of when. people who know more about this than i do say it will probably be two to three years from now that they're not finished with what they're doing. this bubble is growing but it's early in the bubble and these are people who -- i've watched them for 30 years -- it's god to listen to. they could be wrong and jim said it could be right that it will happen sooner. i don't know. but i can tell you and i'll be in taiwan next week. the robustness of that recovery isn't just about empty apartment buildings and people speculating in stocks and real estate. they have real manufacturing thrusts. they've got a manufacturing capacity. they just surpassed germany
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yesterday as the second largest exporter in the world. they are doing -- they're recovery program, their stimulus program, $587 billion has been a spectacular success by contrast to ours. >> your very kinzian tonight. you're saying bubble problem is more for several more years. let me come back to the issue of profits. what's your -- and investment sector. mike, what's your key picks? what's your stock pick? >> i'll you three. i think the cycle aallege recovery will occur and one of the things you can look at is the big, very well-priced companies like exxonmobil, jp morgan, and sorkin was right before in the previous segment. it doesn't matter what they do politically but they will earn money. and intel. i their we'll look back and one of the three will make you a lot of money and the other two will probably do okay. we'll have an complex recovery as jim paulson said.
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>> jim paulson, i agree with you totally on the economic recovery. last thought. what's the risk of rising interest rates? let me put the fed aside. if treasury rates continue to rise, let's say because there is a mini boom. let's say because through are inflation worries on commodity increases including oil, could that derail the rally? >> i think it could if the rise in the yields, larry, are predominantly due to solely inflation fears. in other words, if it's commodity prices that caused ten-year yield to jerk quickly to 4.5%, not real growth. not real advancement in gdp or advancement in real job creation then i think that's a potential -- i don't know if derailment is the word -- but that could heat to a short term selloff in equities for a period of time. if yields go up because of real growth, that's a different story. equity also hand that will okay. >> that could be bullish as long as you get the earnings to go with it. >> that's right. >> we got to jump out. mike, thanks very much.
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jim paulson, nice to see you. coming up, drill, drill, drill. oil had a 15-month high. we'll drill down on the meltdown that's when we come back.
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oil hits a 15-month high and it wasbility $30 a year ago. interior secretary, ken salazar rules drilling of oil and gas out of bounds on federal lands. no drilling. how high does it go before we go back to drill, drill, drill? we'll talk to our contributor, john. john, like a lot of these "obamanomics" regulations, i don't understand this one as oil prices go up. now, first of all, update me on your outlook for oil. it's $83, which is a breakthrough. >> it's making my $100 barrel oil on the first half of the year a lot easier to sit with because we're clearly on course for that for a variety of reasons.
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not the least of which is the china economic numbers that you just discussed in your last segment with mr. holland. >> because they're demanding oil? is that right? >> demanding energy? >> absolutely. the good news is oil prices are up because there's an absolute recovery under way. the china story, as far as i can see it, is as real as a heart attack. and we better prepare for that. >> there's a big story in business week that says there's no such thing as peak oil. it's a good -- i want to get that guy to come on the show. no such thing as peak oil. why can't we drill oil and gas and or are we going to rely on windmills on nantucket to provide us with the marginal unit or new power? >> well if we do it will be very expensive. and i have been been opponent of the peak oil theory my entire cry, not for the least of which reasons was that this morning's announcement from the exploration and several other companies that might have made the oil find of a decade in shallow gulf waters.
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and it's a real game-changer for the companies involved and in a neighborhood that is going to be one of the biggest finds in decades. >> this is free port, mack more ran exploration. >> where are they in the gulf? not the deep water, the shallow water? >> they're in shallow water. but they are going as deep at mount everest is high. don't get me wrong. deep underground but because they're in shallow water their hitting the ocean floor about ten miles down which is knotting. >> and the government's letting them do that. is that right? >> yes. they already leased land around the fine which should enable them to extract it. but my point is the government shouldn't be shutting off access to the land. with the new seismic like like with the shale in natural gas, we're finding oil that we never thought was there because we couldn't see it. >> drill, drill, drill. that's the deal. >> new technologies every day, larry. this was thigh problem with the peak oil theory from the beginning.
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how sku have the hubris to tell me we had the knowledge and the science to help us find this oil? our cell phones were as big as cars. now they fit in your pocket. the same thing goes for satellite technology it can find oil and new drills that can get to places without harming the lands. anywhere near what we had in the '50s and '60s and '70s. >> my only amendment is nuclear power. i think that has to be a big part of it. i think president obama should be out there with a national energy strategy that produces more energy, not less. john, thank you. >> absolutely. and alternatives are a part of it but it has to be a smooth, multidecade transition. the rest of the world isn't shooting themselves in the foot. >> and the energy sector unleashed, including nuclear power, will create a lot of jobs. a lot of jobs. john, got to leave it there. thanks for your update. coming up, i'm going to take your calls. the kudlow hotline is opened for business. stay with us.
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this is not pay the hospital insurance. this is not pay the doctor insurance. this is not major medical insurance. this is affordable-we-pay-cash -directly-to-you- fast-when-you're-sick -or-hurt-insurance. if all you know about us is... aflac! ...then you don't know quack. to find out all the ways aflac's got you covered, visit knowquack.com >> the ked low hotline for phone calls opened. here's steven from florida.
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>> caller: what is the fcc doing wasting its time instead of looking for ponzi schemes going after bank of america and merrill again? >> you mean the additional lawsuit that they announced today? >> exactly. >> i've never really understood that. and by the way, if that deal wasn't put together, i don't know what would have happened because we were on the edge of the abyss. so you're asking a good question. but they're not going to be deterred. i will get, my friend, that it has a lot to do with politics and public relations as the sec tries to tell people, after they blew so many things including madoff, that they are a tough-minded agency. let's go to robert in ohio. hello, robert. >> caller: i wanted to thank you to your service to your viewers and your country. my question has to do with drill, drill, drill. i was wondering if you could give my a kudlow 101 moment and explain to me how that would impact the value of the dollar, assuming that would get interest
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carry trade? >> that's an interesting point. i'll tell you this. i believe if we actually launched a new drill, drill, drill program, including nuclear and clean coal and it also includes green. but market driven. but stop the regulations against nuclear. and open up more fields for oil and gas. okay? i think it would help the dollar. it would be a job creator. it would be home-grown fuel and power supplier. the united states would be let reliant on foreign sources. it would imour balance of payments situation. i think the net did she net would be drill, drill, drill would be a terrific thing for the u.s. dollar and by the way, in the next couple of years it would put at least a million people back to work. that's the key point president obama is missing. we have one more. peggy, a lightning question, please. >> caller: how can the economy expand if it's advice with the federal government putting tax and regulations and the states on the other side who will raise taxes because they're forced to balance their budgets with only
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80% of the population picking up the tab? >> we're out of time. >> peggy, you're right. i say destimulate the federal plan that taxes and regulates growth. it's exactly the wrong message. let's have some supply-side tax cuts instead. coming up, my final thought. right now 1.2 million people are on sprint mobile broadband. 31 are streaming a sales conference from the road. 154 are tracking shipments on a train. 33 are iming on a ferry. and 1300 are secretly checking email on vacation. that's happening now. america's most dependable 3g network. bringing you the first and only wireless 4g network. right now get a free 3g/4g device for your laptop. sprint. the now network. deaf, hard-of-hearing and people with speech disabilities access www.sprintrelay.com.  now get a free 3g/4g device for your laptop.
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kudlow report" tomorrow night. i'll be joined by florida republican senator al candidate, being dubbed the potential first
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tea party senator. and he's making a big mark against governor charles crisp and stanford university john taylor rejoins us. we had join on last week. we're bringing him back again tomorrow night. he's pushing back against ben bernanke. you saw him in the "wall street journal" open ed piece today. bernanke may not even make it to his reconfirmation. we'll talk to somebody that really knows monetary policy.

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The Kudlow Report
CNBC January 11, 2010 7:00pm-8:00pm EST

News/Business. Larry Kudlow.

TOPIC FREQUENCY Alcoa 11, China 10, Donald Kohn 8, Jim Paulson 7, Bernanke 6, John Taylor 6, Us 6, America 5, Taylor 5, Goldman Sachs 5, At&t 4, U.s. 4, Copenhagen 3, Isaac 3, Bill Isaac 3, Jim 3, Kudlow 2, Julie 2, Mike 2, Greenspan 2
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on 6/26/2011
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